Foreign pension counts towards your income, but taxpayer finds out there's another catch
We pay tax not only on our Canadian-source employment, business or investment income, but on our total worldwide income, including foreign income, such as a foreign pension, which must first be converted to Canadian dollars before it’s reported on our returns annually.
The result is that Canadian tax is payable on this foreign income, which is also included in your “annual net world income” used to determine eligibility for certain government income-tested benefits, such as the Guaranteed Income Supplement (GIS) and Old Age Security (OAS).
A recent Tax Court case involved a taxpayer who was forced to repay some of his GIS as a result of his foreign pension income. The taxpayer filed an appeal with the Social Security Tribunal after the Employment and Social Development Canada (ESDC) determined he had been “overpaid” GIS because of “an incorrect calculation of his income.”
As with other OAS-type appeals, the court’s jurisdiction is limited to determining whether the taxpayer’s income was correctly calculated. In this case, the question before the court was whether the taxpayer’s income for the period of July 2014 to June 2018 was properly determined for the purpose of his GIS entitlement.
The taxpayer is both a Romanian and Canadian citizen who collects pension income in both countries. He receives the GIS and OAS. From July 2014 through June 2018, however, ESDC determined he had been overpaid $2,044 in GIS income.
GIS eligibility is based on income and is available to low-income OAS pensioners. For example, in the fourth quarter of 2023, a single senior whose annual income is below $21,456 receives up to $1,057 of GIS per month. GIS benefits are generally reduced by 50 cents for every dollar of income, other than OAS and
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